Category: SMRT
SMRT – BT
Higher train ridership, as well as its rental and advertising business, helped to power SMRT Corp’s net profit up 7.7 per cent to $42.56 million for the second quarter ended Sept 30, 2008 compared with the same period a year ago.
Group revenue in Q2 grew 15.1 per cent to $227.03 million as total operating expenses also rose 17.9 per cent to $181.14 million due to increased diesel and staff costs.
‘SMRT has continued to grow its profits in this quarter,’ said president and CEO Saw Phaik Hwa. ‘However, volatile energy costs, inflation and higher operational costs will have an impact on our performance.’
Earnings per share in the second quarter rose to 2.8 cents from 2.6 cents year-on-year.
For the first half ended Sept 30, 2008, net profit rose 7.0 per cent to $82.87 million. Interim group revenue was 13.1 per cent higher at $442.97 million.
Earnings per share for the first half was 5.5 cents, up from 5.1 cent in the corresponding period. An interim ordinary dividend of 1.75 cents per share tax-exempt has been declared.
Transport – CIMB
Sheltered stations
• Strong outperformance. Since our last sector update in Sep 08, Singapore’s public transportation stocks continue to outperform as investors seek safe havens in the current market turmoil. On average, these stocks have outperformed the FSSTI by 29% and 43% over one and three months respectively. As a unique asset class, both CD and SMRT have operations that should remain quite insulated from weak demand and rising cost of operations. There is also relatively good earnings visibility while the continued decline in energy prices should improve profitability.
• Declining energy prices. Demand for energy has fallen in tandem with a slowing global economy. Crude oil prices are now below US$90/bbl, a 9-month low. While there were concerns earlier in the year about pressures from higher fuel prices for both CD and SMRT, these fears have now been put to rest. Lower fuel prices are positive as both CD and SMRT do not hedge their diesel fuel requirements.
• Ridership growth to boost revenues. Again, we reiterate the success of the Singapore government’s initiatives in inducing motorists to switch to public transport. Recent rises in electronic road pricing (ERP) charges, high fuel prices and a looming recession have all been boosting ridership. Even with the recent 0.7% hike in fares, public transport is still the most economical way to travel in Singapore. Rail ridership growth has been in the double digits for most of the year, despite high base figures.
• Maintain Overweight. We reiterate our Overweight position on the sector on the back of defensive qualities with limited downside risks in the current risk-averse environment. We maintain Outperform with an unchanged DCF (WACC 9.2%, TG 2%) target price of S$2.28 for CD, supported by prospective dividend yields of over 5%. SMRT remains a Neutral with an unchanged DCF target price of S$2.09 (WACC 8.5%, TG 2%) due to the limited upside to our target price.
SMRT – DMG
Investing in Shenzhen transport company
SMRT has entered into an agreement to acquire a 49% equity interest in Shenzhen Zona Transportation, a leading road transport company in Shenzhen. The purchase consideration of Rmb 430m (S$90m) will be paid in cash. The balance 51% continues to be held by National Express Transportation Group.
Zona provides the following:
• Taxi services and car and bus repair within Shenzhen;
• Town and county bus services, car leasing, bus and coach services within and beyond Shenzhen; and
• Public bus and mini bus services outside the Shenzhen Special Economic Zone.
Zona has an existing fleet of 803 buses, 142 chartered & tourist buses, 78 long haul coaches, 830 taxis and 260 leased cars in the Shenzhen region.
Following the acquisition, Zona will be an associate company under SMRT. The investment is earnings accretive. But SMRT expects immaterial financial impact on SMRT’s FY09 results.
As of Dec 07, Zona has a net asset value of Rmb 483m (S$101m), represented by NTA of Rmb 59m and net intangible asset of Rmb 424m. The net intangible assets largely comprise taxi operating licences acquired through open bids.
Separately, SMRT has signed a new 6-mth fixed-rate electricity contract effective 1 Oct 08. The rate for this new contract is 30% higher than that for the previous 6-mth contract, despite the recent softness in crude oil price. We have therefore raised our forecast of FY09 electricity expenses.
On a positive note, we have raised FY09F MRT ridership growth to 10.9% (versus earlier assumption of 9.7%). This follows the 11.6% YoY expansion for Apr-Aug08 to a MRT monthly average ridership of 42.69m. After factoring in higher electricity expenses as well, we are cutting our FY09 net profit forecast by 1.6% to S$144.5m.
SMRT share price has risen 17.9% YTD whilst the STI has fallen 31.9%. Most of the positives are already factored into SMRT share price. Though the investment in Zona is a good start to SMRT expanding overseas, the impact is seen to be marginal in the short term. We see little upside for SMRT share price going ahead. Even the FY09 dividend yield of 4.1% (based on 85% payout ratio) is only slightly higher than the 3-mth SIBOR of 1.85%. The market risk premium is now 9.46%, versus 8.68% two months ago. Consequently, our DCF valuation has been cut from S$2.08 to S$2.03. We are downgrading SMRT from BUY to NEUTRAL.
SMRT – BT
SMRT buys stake in China transport firm
It will pay $89.7m for a 49% stake via its subsidiary SMRT Hong Kong
SMRT Corp has agreed to pay $89.7 million for a 49 per cent stake in a leading road transport company in Shenzhen.
Via subsidiary SMRT Hong Kong, SMRT has entered into a deal to buy investment company Shenzhen Zoto Investment’s equity interest in Shenzhen Zona Transportation Group (Zona).
KhattarWong provided legal services for the transaction.
Zona has a fleet of 803 buses, 142 charter and tourist buses, 78 long-haul coaches, 830 taxis and 260 leased cars in the Shenzhen region.
The Zona group comprises 10 subsidiaries and three associated companies.
Zona itself will become an associate company of SMRT following the acquisition.
SMRT said Zona has grown its bus fleet from just 300 in six years. It is the bus operator in Shenzhen’s Bao An district, so growth is expected to be robust.
The other 51 per cent of Zona’s equity will continue to be held by National Express Transportation Group (NE), a company that provides inter-city bus services in China.
SMRT president and CEO Saw Phaik Hwa said the acquisition is a ‘milestone in the expansion of SMRT’s business overseas’.
Zona is SMRT’s first equity investment. Its other overseas venture was in August last year when its subsidiary SMRT Engineering partnered Dubai real estate developer Nakheel to operate The Palm Monorail there.
The investment in Zona will be accretive to SMRT’s earnings but is not expected to have a material impact on the group’s financial results for full-year 2009.
SMRT posted a 6.2 per cent rise in net profit to $40.3 million for its first quarter ended June 30. Revenue rose 11.2 per cent from the previous year to $215.9 million.
SMRT – BT
By WONG WEI KONG
SMRT Corporation Ltd, through its subsidiary SMRT Hong Kong Ltd, has entered into an agreement to acquire a 49 per cent equity interest in Shenzhen Zona Transportation Group Co Ltd (Zona), a leading road transport company in Shenzhen.
The S$89.7 million (US$62.8 million) acquisition is a significant overseas investment for SMRT. National Express Transportation Group Co Ltd (NE) will hold the remaining stake in Zona.
Said SMRT president and chief executive officer Saw Phaik Hwa: ‘This acquisition marks the beginning of a strategic relationship between SMRT and NE to further grow Zona’s transport services in Shenzhen and beyond…This acquisition is a milestone in the expansion of our business overseas.’
Following the acquisition, Zona will be an associate company under SMRT. The investment will be accretive to earnings. However, it is not expected to yield any material financial impact on SMRT’s full year FY2009 results.